Why there is more to regulatory reporting than just reporting

23 March 2020
By Neil Vernon, Chief Technology Officer

It’s no secret that Coronavirus is creating unprecedented challenges for the financial services sector. And given the severity of COVID-19 and its negative impact on global markets, it’s not surprising that the FCA is clamping down on regulatory reporting.

In a statement just this week, the watchdog has said that firms are expected “to take all reasonable steps to meet their regulatory obligations” despite disrupted work patterns. And when it comes to trading, those still reporting manually (of which there are more than you might think), regulatory compliance promises to be a heavy burden during the upcoming period of prescribed absence; from entering orders and transactions to using recorded lines, new working arrangements from home can present a whole host of compliance challenges.

As A-Team Insight point out, this will separate the wheat from the chaff: who has invested in the right technology and who remains bogged down in the quagmire of manual processing and legacy tech. The current crisis presents a test for us all; for traders, the stronger the automation, integrity and control of your technology infrastructure, the more resilient you are going to be. But I can’t help wondering – why should the FCA need to call it out at all? The bottom line is: if you can’t report accurately and on time, you shouldn’t be trading. Yes, working from home presents new challenges, but regulatory reporting should not be one of them.

Why?

Because there is so much more to regulatory reporting than just reporting. It sounds obvious, but the truth is that automation is being underutilised, and the high value cost of misreporting misunderstood. There is so much more to getting reg-reporting right than a tick box exercise.

Potential fines and reputational damage aside, if you’re not reporting right, it’s a huge clue that you don’t know where your data is and as a result what’s going on in your organisation. Whether it’s banks or corporates, sell-side and buy-side alike, firms need automated indicators of the health of their organisations to truly exercise regulatory control.

It also goes further than that. The notion that “it all comes down to data” is a misconception. We’re not just matching rows in a database here, we’re reconciling reality, something that happened in the real world, and your record of it. Have I paid my bank? Has the trade gone through? Where is my money sitting? From where I’m standing, everything is reconciliation.

Ultimately, firms that fail to automate reporting processes are turning a blind eye to potential business risks in the real world and opportunities to enhance control and efficiency – especially in a climate that presents risks for us all.

Author — Neil Vernon, Chief Technology Officer, Gresham